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Apr. 10, 2014

TODAY’S DEALS: Meridian Arranges $24.8M in Acquisition Financing for Chicago Portfolio

Chicago—Meridian Capital Group LLC arranged $24.8 million in acquisition financing for an eight-property multifamily portfolio located in Chicago.

The $24.8 million, 10-year financing package, provided by a CMBS lender, features a competitive fixed-rated of 5.11 percent with an initial period of interest-only payments. The debt is structured as four separate loans, each secured by two assets, and $21.5 million of the $24.8 million committed amount was funded at closing, with the balance becoming available based on the financial performance of the portfolio. Unlike a typical CMBS loan with a future earn out structure, the borrower does not pay interest on the undrawn balance until that portion is funded. This transaction was negotiated by Meridian Managing Director Seth K. Grossman and Associate Andy Strauss, who are both based in the company’s Carlsbad, Callif., office.

The properties included in this portfolio total 224 units and are located in the West Rogers Park, Lincoln Square, Ravenswood and Irving Park areas of Chicago.

“This transaction was very unique and Meridian was able to leverage its outstanding CMBS lender relationships to tailor a completely custom structure. The sponsor had two objectives going in; eliminate future interest rate risk and obtain the maximum proceeds based upon the implementation of an active asset management strategy,” Grossman says. “In order to achieve this, Meridian tailored the financing to remain on the lender’s balance sheet for up to six-months, providing time to improve financial performance of the assets. Additionally, based upon meeting a positive net operating income hurdle, an additional interest-only period, beyond what was provided for at closing, will become available prior to securitization,” he adds. “Clearly this loan is not an off-the-shelf product and is a testament to the creativity of the lender, the strength and track record of the sponsorship and the enhanced liquidity in the debt capital markets,” Grossman concludes.

Oak Grove Capital provides $11.1M in FHA refinancing, obtains waiver to three-year rule

Lyndale PlazaRichfield, Minn.—Oak Grove Capital recently originated an $11.1 million FHA 223(f) loan for Lyndale Plaza Apartments, a 94-unit affordable housing community in Richfield, Minn. The 35-year, fully amortizing loan was used to repay existing debt and obtain a fixed interest rate.

Lyndale Plaza Apartments is a Class A property with 20 percent of its units set aside for low-income residents. Completed in November 2012, the property is situated in a very desirable, transit-oriented location. The original financing package included 4 percent tax credits, tax increment financing through the city of Richfield, and a floating-rate tax-exempt bond issuance from the state of Minnesota.

Oak Grove was able to obtain a waiver to HUD’s “three-year rule” and structure a long-term, fixed-rate FHA loan that not only locked in financing costs over the entire life of the property, but allowed the borrower to pay for cost overruns that occurred during construction.

Ken Dayton, managing director of Oak Grove Capital’s St. Paul office, comments, “It’s situations like this where we can really add value for our clients. Our extensive knowledge of what can be accomplished through HUD, and not just what’s outlined in the HUD Guide, allowed our client to obtain long-term, fixed-rate financing three full years ahead of schedule.”

“Oak Grove Capital once again provided great service. They guided us through the FHA loan process and, in the end, locked us into a great long-term interest rate,” adds co-owners of the property, Mike Swenson and Terry and Mary McNellis. “We have been longtime clients of Oak Grove, and this type of execution keeps us coming back.”

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